Ashton v. Glaze, 8542.
| Decision Date | 14 March 1938 |
| Docket Number | No. 8542.,8542. |
| Citation | 95 F.2d 427 |
| Parties | ASHTON v. GLAZE et al. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Edwin J. Miller, of Los Angeles, Cal., for appellant.
Frank L. Guerana, of San Francisco, Cal., and Eugene P. Fay, of Los Angeles, Cal., for appellee Carpenter.
Before DENMAN, STEPHENS, and HEALY, Circuit Judges.
The appellant, as trustee in bankruptcy for the estate of Jerome M. Glaze, brought this action to avoid transfers of property which had been made by the bankrupt to his daughter; also, to set aside mortgages or pledges of the property which had been made to the Automobile Owners Indemnity Underwriters, an inter-insurance exchange. The appellee Carpenter, is the insurance commissioner of the State of California, acting as liquidator of the insurance exchange. For convenience, the latter will be referred to in the opinion as Underwriters. The case was referred to a special master, who recommended a decree setting aside the conveyances and quieting title in the appellant trustee, without prejudice to the rights of the appellee insurance commissioner, as liquidator of Underwriters. Such decree was entered, and the trustee alone has appealed.
Appellee's interest in the property involved arises out of two transactions, which for convenience will be discussed, as in the briefs, under the captions "$25,000 transaction" and "$10,000 deal."
The "$25,000 Transaction." In 1929, Glaze agreed with promoters to purchase stock in a proposed corporation to be known as the Citizens Union Corporation, Ltd. This agreement was "conditioned upon the granting of a charter to the said corporation and a certificate of authority to sell and dispose of its securities." The contract also contained the following provision: "It is further understood that if within six (6) months from the date of delivery of said stock you desire to dispose of same at the same price as herein stipulated, we agree to sell it for you within the period of twelve (12) months from said time and apply proceeds to the satisfaction of said notes hereinbefore mentioned." The permit to sell stock, which was later issued to Citizens Union Corporation by the corporation commissioner of California, authorized the sale for cash only.
Pursuant to the agreement, Glaze gave to the Citizens Union Corporation, attorney in fact for Underwriters, a note for $25,000 secured by a deed of trust on certain properties in Kern county. It was understood by Glaze that these securities would be used to qualify the insurance company to do business under the laws of California. It was also understood between the parties that, after the securities had been used for this purpose, they would be returned to Glaze. Most of the stock which Glaze received in exchange for his note was returned to the Citizens Union Corporation. The note and trust deed were later transferred to Underwriters, and were renewed directly to it. At the time of this assignment Glaze was a director of Citizens Union Corporation.
The "$10,000 Deal." In January, 1930 Glaze gave to the Citizens Union Corporation a note for $10,000, and as collateral to it assigned a note for $12,500 and a deed of trust, executed by one Bassett. As consideration for his note and the collateral given with it Glaze received $10,000 in cash, half of which was used to discharge a prior mortgage on the Kern county property, for which a deed of trust had been given as above stated. This enabled Underwriters to satisfy the legal requirement that the trust deed be a first lien on the property. The remaining $5,000 was used by Glaze to purchase stock, which he immediately resold. From the sale of this stock Glaze realized $4,650. In March, 1931 the Glaze note for $10,000 was renewed directly to Underwriters, and the Bassett collateral was assigned to that concern. At the same time, and as additional security, Underwriters was given a mortgage on a Long Beach apartment, which Glaze owned.
The securities held by Underwriters under both the "$25,000 transaction" and the "$10,000 deal" were listed as assets of Underwriters in its annual statements. Upon the basis of these statements the California insurance commissioner issued to Underwriters certificates of authority to do business for the years 1930 to 1933. In December, 1933, Underwriters was adjudged insolvent and the state insurance commissioner was appointed liquidator. The liquidator was ordered to take possession of Underwriters' property and conserve its assets "for the benefit of its policyholders, its creditors and the general public." Creditors' claims aggregating $150,000 have been filed with the...
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